Brazil’s private sector contracted the most in six years during March with activity falling in both manufacturing and service sectors, survey data from Markit Economics showed Monday.
The HSBC Brazil Composite Output Index declined to 47 from 51.3 in February, which was the fastest drop in output since April 2009. A PMI reading below 50 shows decline in activity.
The Purchasing Managers’ Index for the services sector tumbled to a 70-month low of 47.9 in March from 52.3 in February. Activity fell across the board with financial intermediation and renting & business activities as the main sources of weakness.
“The rebound in Brazil’s private sector economy seen in February was short-lived… A lethargic demand environment was blamed for a further drop in new business, while companies responded by cutting employment,” Pollyanna De Lima, economist at Markit, said.
“With IBGE indicating that the country’s economy achieved only weak growth in the final quarter of 2014 (+0.3% q/q) and PMI figures showing that Brazil was in contraction territory in 1Q 2015, there seems to be little evidence for a recovery any time soon.”
New orders received by the Brazilian private sector also declined the most since April 2009. Orders received by the service providers fell the most since April 2009. New business for manufacturing firms also decreased in March.
Employment in the private sector contracted for the first time in four months with reductions in both manufacturing and services sectors. Jobs were shed in the service sector, ending a three-month sequence of job creation. Private sector firms listed attempts to cost reduction amid falling new work as the reason for reducing payroll numbers.
Input price inflation in the private sector climbed to a 76-month record in March. In the services sector, the pipeline inflation figure was the second-strongest in over six years. Panel members blamed the higher inflation on increased costs of utilities and petrol, a depreciating currency and rising interest rates. Consequently, selling prices were raised further.
Meanwhile, service providers signaled positive sentiment though the Business Expectations Index slipped to its second-lowest reading in the history of the series. Surveyed companies expect output growth in the year ahead to be hampered by sharp cost rises, competitive pressures and tough domestic economic conditions.
The material has been provided by InstaForex Company – www.instaforex.com